Bitcoin and ether markets are ruled by perps. SpaceX showed how far their influence can go
The article explains that perpetual futures contracts, or 'perps,' now dominate the cryptocurrency market, accounting for 93% of futures volume. Research suggests these derivatives, rather than spot markets, are the primary drivers of price discovery for assets like Bitcoin and Ether.
Why it matters
Understanding that derivatives dictate crypto prices is crucial for investors and regulators, as it shifts the focus from traditional supply-demand spot trading to leveraged financial instruments.
Ask most people how a crypto price gets set and they will describe spot trading: buyers and sellers meet on an exchange, and the last trade prints the price. But that has not been how it actually works for years as far as bitcoin, ether and the broader crypto markets are concerned.
Perpetual futures, also called perpetual swaps or “perps” for short, are leverage-friendly contracts that never expire, and they now account for roughly 93% of all crypto futures volume, with daily perp volume routinely running larger than the spot market underneath it.
A traditional futures contract has a settlement date, which is when it comes due and its price is forced to meet the spot price of the thing it tracks, also called the underlying. But a perpetual has no such date and can be held indefinitely (by paying a cost known as ‘funding rate,’ which varies daily).
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